Gold Rises Due to Weak US Dollar
Gold prices () rose by 0.88% on Monday, supported by a weaker (USD).
“Gold trades higher after finding support ahead of $3,245 and following a correction last week as Middle East tensions eased, and strong risk sentiment across global equity markets extended a ten-week period of consolidation. Focus on Trump’s fiscal debt-swelling tax bill, trade talks, and their impacts on the US dollar and Treasury yields”, Saxo Bank analysts noted.
Analysts expect the gold market deficit to peak in Q3 2025 before easing, driven mainly by a decline in investment demand. The anticipated approval of US President Donald Trump’s ’big, beautiful bill’ and the finalisation of trade agreements with key partners are expected to alleviate concerns about US economic growth. These developments could shift investor focus back towards risk assets, further weakening demand for gold in the medium term. The fundamental backdrop for the gold market is likely to soften after its Q3 peak, setting the stage for a gradual rebalancing of supply and demand.
XAU/USD continued to rise during the Asian and early European trading sessions. Market participants are now turning their attention to Federal Reserve (Fed) Chair Jerome Powell’s upcoming testimony before Congress. Powell’s testimony on Tuesday and Wednesday is expected to provide further clarity on the Fed’s policy stance amid persistent concerns and mixed economic data. Any hints of or changes in policy trajectory could further influence XAU/USD’s direction. Key levels to watch are support at $3,245 and resistance at $3,320.
Euro Reaches Four-Year High
The euro (EUR/USD) climbed towards 1.17800—its highest level against the US dollar (USD) since September 2021.
The euro has risen by roughly 14% against the US dollar year-to-date, benefiting from the US dollar’s weakness and renewed investor confidence in the eurozone’s fiscal outlook. Market sentiment has shifted in favour of the euro following the announcement of a major EU spending bill, seen as a catalyst for growth within the bloc.
Market participants are also closely monitoring developments around a proposed large-scale US spending bill, which has contributed to the weaker US dollar trend in the first half of the year. ’We are halfway through the year, and the big winners have been the , the , and the ’, noted Amo Sahota, Executive Director at Klarity FX. She highlighted how shifting fiscal expectations and investor positioning have influenced the US dollar’s trajectory. Investors have reassessed the region’s growth and inflation dynamics in light of expanded fiscal commitments, which supported the euro.
Trade developments remain in focus, with Bloomberg reporting that the EU is open to a trade agreement with the US that would impose a universal 10% tariff on many European exports. However, US Treasury Secretary Scott Bessent signalled that countries could still face higher tariffs on 9 July despite ongoing negotiations. This has added uncertainty to the euro’s outlook. Meanwhile, the US and China have resolved issues around the export of Chinese rare earth minerals and magnets. This further refines their trade agreement and offers modest relief to global trade tensions, though the overall backdrop remains complex for the Forex market.
U.K.–US Trade Deal Supports British Pound
The British pound () remained steady around 1.37100 on Monday, holding near its highest level since October 2021. GBP/USD found support following the implementation of a new U.K.–US trade deal.
The agreement has reduced tariffs on British car exports from 27.5% to 10%. The deal also removed duties on aerospace goods, including engines and aircraft parts, offering a modest boost to the U.K.’s export outlook. However, negotiations to remove tariffs on core steel products are still pending, highlighting that trade headwinds are not yet fully resolved.
Domestically, the Q1 gross domestic product growth rate was confirmed at 0.7%, underscoring the U.K.’s economic resilience. The data aligned with earlier estimates and reflected steady, albeit modest, momentum. The Bank of England’s (BoE) cautious stance on interest rates, unlike other regulators such as the European Central Bank, continues to support the pound as U.K. inflation remains stubbornly high. has shown little movement over the past year, complicating the BoE’s ability to consider rate cuts without risking persistent price pressures and keeping markets focused on upcoming inflation and labour market data.
Meanwhile, the US dollar softened as investor focus shifted towards US President Donald Trump’s proposed tax and spending bill, currently under Senate review. The plan, which could add approximately $3.3 trillion to the national debt, has created greater uncertainty around US fiscal policy and potential implications for Federal Reserve independence. This backdrop has weighed on the US dollar, providing additional support for the pound in the near term as markets monitor the evolving US fiscal outlook.